Advantages of Using A Zero-Based Budget
Budgets are just lists - lists of what money you have coming in, and where the money is going out. You can have a daily budget, a weekly budget, a yearly budget, but, what you likely deal with most often is a monthly budget.
Now, consider zero-based budgeting. In corporations, zero-based budgeting means that every budget item must be approved as though brand-new. Your own personal finances can make use of that concept, by allocating every dollar of income to categories, and then, for every category of the monthly budget that goes up, a corresponding amount elsewhere in the budget must go down.
One advantage of this method is that those expenses that must be paid are taken care of first, with reductions going to those areas that, though useful or enjoyable, do not require mandatory payments. The flaws in previous budgets immediately become apparent — if all of your income goes for required payments, then you must evaluate the necessity of those areas in your life, and consider alternatives. Gym membership may give you access to the exercise you need, but if those payments climb too high, might you try jogging, or those barbells growing dusty in your garage?
Another advantage is that you will continually evaluate the way your life is going. If you go out to dinner every night, and enjoy the meals, but find the growing bills too high, maybe you should consider learning to cook well yourself. The wasteful parts of your life can be trimmed — why pay to have jugged water delivered, when you can invest in a good faucet filter at the hardware store? In the same way, you may find activities in your life that take up too much time, but offer little payback. Can you find someone else to do that task, freeing you to move on to something more profitable? Use this pondering over your monthly budget to evaluate your life — are you doing what you want to do?Continued on the next page